the arrival of more goods and services to the neighborhood, which benefits all residents, old and new; and

a reduction in crime.

Most importantly, the article claims there is little evidence to support the belief that when high-income residents move in, low-income residents need to move out. In fact, long-term residents are more likely to stay in gentrifying neighborhoods than residents of non-gentrifying, low-income neighborhoods.

How does that work?

Zoning laws are less strict in low-income parts of cities than in neighborhoods where high-income residents already live. Therefore, it’s easier to build up gentrifying neighborhoods than long-standing high-income areas. So, when a high-income household moves into the neighborhood, they aren’t necessarily taking the home of a low-income earner. They’re more likely moving into a newly built, luxury multi-family unit.

At least, that’s how it ought to work — but gentrification isn’t always so neat, especially in California’s vocal not-in-my-backyard (NIMBY) neighborhoods. But more on that in a bit.

Perhaps the biggest benefit of gentrification is its push against income segregation.

Income segregation is bad for real estate

When you hear the phrase income segregation, you probably think about pockets of low-income neighborhoods within your closest urban center. But in practice, income segregation means the isolation of high-income households, resulting in pockets of wealthy neighborhoods in an otherwise low-income cityscape.

Income segregation of wealthy households allows fewer individuals to benefit from a city’s wealth and resources. To translate into real estate terms, it means the majority of a city’s housing stock remains low-tier or simply rentals, while those coveted high-tier home sales are few and far between, accessed by only a select number of real estate professionals.

Income segregation occurs more often in metro areas where there is a high level of local participation in zoning decisions. In contrast, metros located within states that have more top-down state-level involvement in zoning laws see less income segregation, according to a UCLA study.

Here in California, we have a lot of local involvement in our desirable coastal cities. NIMBY advocates are on every block, most infamous in San Francisco.

The number of new jobs in San Francisco has increased at eight times the rate of new housing additions, according to the Economist. Normally, more jobs translates to more real estate transactions. After all, workers need somewhere to live. But San Francisco’s stubborn refusal to add to its existing housing stock has resulted in more people living in crowded situations, along with workers living further away from the city.

Gentrification has been rampant in San Francisco during the past couple of decades. For example, the median value of a home in the Mission District was $278,400 in 1998, compared to $1.49 million in 2018, according to Trulia. That’s an increase of 535% in 20 years.

For residents of gentrifying neighborhoods — and real estate professionals who rely on a steady flow of transactions to make a living — these new laws are a step in the right direction toward more financial stability.

The research tells us gentrification doesn’t have to be as painful or one-sided as it is in places like the Mission District. Ultimately, the diversity of incomes and services gentrification brings with it benefits residents. But only if these residents aren’t forced out of their neighborhoods.

The solution is more construction in these desirable areas, and quickly. Expect to see this happen in the coming years, as California’s legislation finally catches up to demand.

2 Comments

Exactly correct, we need more supply. The basic laws of supply and demand are like gravity, and we will never escape it or overcome it. Rent control, in line with the affordable housing act being proposed in November is not at all the solution. It does nothing about supply, but artificially lowers the market rents via rent control boards. However, lower prices will always increase demand, and it does nothing about supply, thus exacerbating the current housing crisis. Gentrification is an emotion topic, but it can’t really be stopped in a free market. The solution to the housing crisis must be logically thought out with regards to the basic laws of economics, and more supply is the only true answer.

The road capacity shortage is more severe than the housing shortage. Voters would not oppose additional housing as strongly if they didn’t know that more residents mean more traffic delays. When did California decide to stop increasing road capacity in step with development?

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